CEC benchmark provides a “common guidebook” for collaborative engagement with companies to address gaps and opportunities in achieving a just transition.
The Climate Engagement Canada (CEC) Net Zero Benchmark has begun scoring ‘focus list’ companies on their climate risks, performance, impacts, governance and disclosures against key criteria with the results set to be released in autumn of this year.
“We aim to determine how we can advance progress on climate and sector-specific goals, benefiting both the companies and the market as a whole,” Kevin Thomas, CEO of the Shareholder Association for Research and Education (SHARE) and CEC Joint Secretariat Co-Lead, said during a webinar.
Unveiled this month, the CEC Net Zero Benchmark provides a set of common standards to help investors frame and assess their climate-related engagement activities with Canadian companies in high-emitting sectors, including oil and gas, mining, transport, utilities, agriculture and food, and industrials.
“The benchmark is critical in guiding investors’ discussions with companies,” said Thomas, adding that it allows companies and investors to measure their collective progress towards aligning with the goals of the Paris Agreement.
“As investors interested in supporting the net zero transition, it provides us with a tool to compare issuers, enabling them to understand how they measure up against their peers within their sector and beyond,” he said. “This, in turn, allows issuers to assess their performance from a disclosure and alignment perspective.”
The CEC is also considering publishing other alignment assessments on individual sectors to inform engagements where companies might be “falling short” on net zero ambitions, he added.
The CEC is a finance-led initiative that aims to enable dialogue between the financial community and corporate issuers to promote a just transition to a net zero economy.
Strong foundations
CEC founder members borrowed elements from Climate Action 100+ (CA100+) when developing the CEC Net Zero Benchmark.
“We used CA100+’s indicators and adjusted them to fit within a Canadian context,” Maia Becker, Senior Director of Corporate Governance & Responsible Investment at RBC Global Asset Management and Vice Chair of CEC’s Technical Committee, said during the webinar.
Six Canadian companies included in the CEC Net Zero Benchmark – CNRL, Enbridge, Imperial Oil, Suncor, TC Energy, and Teck – are already being engaged under CA100+.
The CEC’s technical committee identified early on that a just transition needed to be adequately represented within the CEC Net Zero Benchmark, said Becker.
Over the past 18 months, the committee reviewed the CA100+ benchmark and established a sub-working group, including indigenous representation, to develop indicator nine, a just transition indicator.
“We sought input not only from participants at the CEC but also from NGOs, indigenous groups, and others to ensure that the adjustments made to the benchmark were appropriate for the Canadian context,” she said.
The technical committee also considered the interests of workers, local communities and other key stakeholders, she said.
“The intention was to ensure that companies demonstrated a commitment to addressing the just transition as part of their decarbonisation strategies and plans,” she said. “We followed a planning and engagement approach that emphasised a commitment to implementation.”
“Continued alignment”
Canada’s climate investment gap is as high as C$115 billion annually, with the development of its green taxonomy aimed at helping to mobilise and accelerate the deployment of capital in achieving climate objectives.
The Sustainable Finance Action Council (SFAC) plans to publish a short-form taxonomy covering priority sectors and activities by mid-2023, with full implementation of the initiative set for release by the end of 2025.
Thomas said the CEC Net Zero Benchmark will be regularly reviewed to ensure the “continued alignment” with focus companies to take account of international and domestic developments.
“We are aware that CA100+ is making changes to their focus list of companies, which is something that is on our radar,” he said.
Currently, there are 40 companies on the CEC Net Zero Benchmark’s focus list. The CEC said that, while no decision has been made, it plans to establish a review evaluation period for the benchmark.
“If we conduct annual evaluations [of the benchmark] we must consider all factors to determine the best approach,” said Thomas, adding that changing the focus list too frequently “may not be desirable”.
The CEC Net Zero Benchmark was developed in close coordination with the Canadian government to ensure that “everyone is rowing in the same direction” on climate, he added.
